FedEx Sues U.S. Government After Blacklist Confusion Puts China Business At Risk

FedEx announced on June 24 that "it has filed suit in U.S. District Court in the District of Columbia" to prevent "the U.S. Department of Commerce from enforcing prohibitions contained in the Export Administration Regulations against FedEx." This follows a number of incidents where the courier has failed to deliver packages for Huawei, citing confusion over compliance with the U.S. blacklisting of the Chinese manufacturer.

The most recent of those incidents involved a Huawei P30 smartphone being held on arrival in the U.S., before being returned to its U.K. sender. The issue was that both the sender and recipient worked for PCMag, and so the incident created global headlines. The note attached to the returned package even stated: "Parcel returned by FedEx due to U.S. Government issue with Huawei and China Government."

"Was FedEx within its rights to prevent a P30 Pro from being delivered to the U.S?" tweeted Huawei at the time, slamming the courier's action as a "vendetta."

"FedEx receives approximately fifteen million packages for shipment daily," the company states in its lawsuit. "To comply with Export Controls, FedEx screens the names and addresses of its shippers and the designated recipients prior to delivering any package in order to identify whether the sender and/or recipient are an entity or person on the EAR’s 'Entity List'."

Shortly after the U.S. blacklisting of Huawei was announced, FedEx "misrouted" two parcels sent from Japan to Huawei in China. Huawei claims there were at least two other deliveries that the courier attempted to reroute and that all the parcels involved contained paperwork and no technology. FedEx apologized and explained that the deliveries were "misrouted in error" without any "external pressure" from third-parties (read, the U.S. government).

China is now investigating the original incident, emphasizing through state media the need for companies to adhere to the law and that the investigation will not lurch into any form of retaliation against FedEx. This despite another state-controlled outlet suggesting that this could line FedEx up for an early spot on China's own entity list, if and when it is launched.

This is likely causing FedEx some angst right now given the implications of a ban from the Chinese market. Albeit, according to Reuters, "China’s commerce ministry and FedEx did not respond immediately to a request for comment on the likelihood of the company being added to the ‘unreliable’ list."

FedEx apologized for both the original misrouting and the return of PCMag's P30, blaming operational errors. The company also confirmed that they can "transport all Huawei products" except when shipped to listed Huawei companies "on the U.S. Entity List."

The lawsuit now seeks to clarify the situation for FedEx (and others): "The Export Controls require considerably more screening than possible from common carriers like FedEx... Thus, essentially deputizing FedEx to police the contents of the millions of packages it ships daily even though doing so is a virtually impossible task, logistically, economically, and in many cases, legally."

In short, FedEx contends that the U.S. government has placed an unreasonable burden on the company, one that leaves it with a choice of either "operating under threat of imminent enforcement actions, or ceasing operations that may conceivably lead to enforcement and face possible legal consequences from customers and foreign governments."

Meanwhile, Huawei is reviewing its own options. "The recent experiences where important commercial documents sent via FedEx were not delivered to their destination... undermines our confidence," a company spokesperson told Reuters. "We will now have to review our logistics and document delivery support requirements as a direct result of these incidents."

Was FedEx within its rights to prevent a P30 Pro from being delivered to the U.S? It seems that the question is now about to be debated in full.